The Sindh government has announced major tax reforms in its FY2025-26 budget to support businesses and boost revenue. It plans to reduce the sales tax on services from 10% to 8%, cutting it by 2%. This reduction aims to simplify the tax system and reduce the financial pressure on both businesses and consumers.
In a significant shift, Sindh will move from the current Positive List system to a Negative List system for sales tax on services. Under this new approach, all services will be taxable except those explicitly exempted. This change is expected to widen the tax base, minimize disputes, and reduce legal cases related to taxability.
Currently, the Positive List taxes only selected services, causing confusion and frequent litigation. The Negative List system will tax nearly all services, but essential and social services will remain exempt. Additionally, some newly taxable services will have lower tax rates, easing the burden on affected sectors.
To protect smaller businesses, the budget exempts companies with an annual turnover below Rs 4 million from sales tax. This exemption aims to encourage business growth and prevent small enterprises from facing heavy tax burdens.
Alongside these changes, the Sindh government will remove five existing levies to further simplify the tax framework. These reforms are part of broader efforts to streamline taxation, improve compliance, and increase provincial revenue without overburdening taxpayers.